How to Calculate Corporation Tax
Understanding these rates and calculations ensures accurate Corporation Tax filing and potentially significant tax savings through Marginal Relief. Always verify your company’s specific circumstances, including associated companies and accounting periods, to apply the correct tax rates and reliefs.
Corporation Tax rates depend on your company’s profits and accounting period. Here’s a detailed breakdown of how these rates are applied and the thresholds for different profit levels.
CT Rates
Main Rate:
25% for companies with profits over £250,000.
Small Profits Rate:
19% for companies with profits of £50,000 or less.
Marginal Relief:
Available for companies with profits between £50,000 and £250,000. This relief helps to gradually transition from the small profits rate to the main rate.
Profit Threshold Adjustments
Short Accounting Periods:
If your accounting period is shorter than 12 months, the profit thresholds (£50,000 and £250,000) are proportionately reduced. For example, if your accounting period is six months, the thresholds would be halved to £25,000 and £125,000, respectively.
Associated Companies:
The profit thresholds are also divided by the number of associated companies. If your company has associated companies, these limits are reduced proportionately.
Example: If your company has two associated companies, the thresholds are divided by three (your company plus two associated companies), making them approximately £16,667 and £83,333.
Summary
Main Rate: 25% for profits over £250,000.
Small Profits Rate: 19% for profits up to £50,000.
Marginal Relief: For profits between £50,000 and £250,000, providing a gradual increase in the effective tax rate.
Adjusted Thresholds: Thresholds are adjusted for short accounting periods and by the number of associated companies.
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Need to file your Corporation Tax Return?
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